India’s Sluggish Industrial Output Reinforces Economic Slowdown Fears

About 1.5 million jobs are reported to be at risk if auto sales and consumer demand in sectors like textile and jewellery continue to remain sluggish.

India’s factory output moderately grew at 4.3 percent in July this year as per the Index of Industrial Production (IIP) data released today. The IIP from the previous month of June was a mere 2 percent.

IIP growth has continued to remain below 5 percent over the past several months, reinforcing fears of an economic slowdown. As a result, the job market is unlikely to chin-up in the near future.

“The weakness that has been observed in the industrial sector is likely to continue as other high-frequency data like auto sales, consumer goods durables are showing a very weak prospects for growth”, said Sunil Sinha, principal economist with the India Ratings & Research, a Fitch group company.

The manufacturing sector, which holds job creation potential, continues to remain below 5 percent. In fact, half of the manufacturing sub-industries demonstrated negative growth in July with automobile production being prominent among these. About one million jobs are reported to be at risk if auto sales continue to remain sluggish.

With capital goods (Plants & Machinery) production slipping into negative territory it confirms that industrial capability are being used at 70 percent of total capacity.

The government is expected to announce relief measures to uplift economic sentiment among stakeholders. Last month, the government announced major reforms in the banking sector to provide loans at cheaper interest rates.